The Future of US Crypto Sanctions

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Blockchain analytics firm Chainalysis released an intriguing report this morning that highlights how the Office of Foreign Assets Control (OFAC), a branch of the Treasury Department that deploys financial sanctions to pressure US enemies around the world, has become more adept at targeting crypto activity.

The report includes data on how OFAC is attacking the crypto wallets of a growing number of bad guys, from ransomware scammers to terrorist financiers to those who interfere in Democratic elections. More intriguingly, he also points out that over the past two years, OFAC has imposed sanctions not only on individuals, but also on companies and domestic entities. The latter includes the now-defunct dark web market Hydra, as well as North Korea’s infamous Lazarus Group, a team of hackers that performs sophisticated cyber theft and crypto theft in support of the military of dictatorships.

Meanwhile, the Chainalysis report also examines whether OFAC’s sanctions against crypto entities are deterring criminal activity. In the case of rogue Russian crypto exchange Garantax, the answer seems to be not really since the country’s lawless regime and customers using the service don’t care about OFAC designations in the first place.

The report comes to a different conclusion, however, in the case of Tornado Cash, an open-source protocol touted as a privacy tool that allows anyone to mix Ethereum coins and disguise their provenance. OFAC added the service to its blacklist last August, forcing the operator of the services’ front-end website to shut it down. According to Chainalysis, this has led to fewer criminals (identified by their wallet addresses) using Tornado Cash.

The problem, as the report acknowledges, is that the underlying Tornado Cash protocol remains operational because it is not tied to a specific company or individual who can pull the plug rather than it being a software that no one really controls. This means that whatever OFAC’s ambitions, it may be up against technology beyond its reach. Meanwhile, the agency has also angered law-abiding users who view Tornado Cash as a legitimate tool to protect privacy in an era of increasing financial surveillance.

Finally, the Friday newsletter on Taylor Lorenz’s crypto and influencer story touched a nerve with readers. A number of people wrote to say my sentiment was perfect (thank you!), but others, including Lorenz, took to Twitter to angrily complain that my comment that she had made a name for herself writing about teen trends was condescending and dismissive. I spoke to Lorenz after the episode and, as often happens following a social media outburst, found her to be very friendly and reasonable and understandably upset that my description could downplay the very brave work that she did. she did on the far right and other nasty elements of the internet. Rest assured that was not my intention. Ahead.

Jeff John [email protected]@jeffjohnroberts

DECENTRALIZED NEWS

The Department of Justice and the Securities and Exchange Commission are reportedly investigating whether loans made by trading company Genesis to its parent company, Digital Currency Group, were inappropriate. (Bloomberg)

Bitcoin prices are holding well above $17,000 following positive macro news. (CoinDesk)

Federal prosecutors in Seattle have issued subpoenas to US hedge funds over their dealings with Binance. (Washington Post)

An Ohio man, who was convicted of stealing Bitcoins from a wallet the IRS seized from his brother, spent $122,000 of the loot to swim in a pool of $1 bills alongside strip -teasers. (CoinDesk)

Ethereum developers have agreed that the top priority for the next major network upgrade, codenamed Shanghai and scheduled for March, will be enabling customers to withdraw staked coins. (The Block)

EVEN OF THE MOMENT

Waiting for the SBF mini-series:

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